Gold wipes $560 billion from central banks as equities rally

Top Holders

BlackRock is the top holder in the iShares Gold Trust, with 5.9%, and the fifth-biggest in the SPDR Gold Trust, an exchange-traded fund backed by the metal. Paulson & Co. is the largest investor in the SPDR at 5.7%, according to government filings. Holdings in that fund fell to 1,145.92 tons on April 16, the lowest since April 23, 2010.

Global ETP holdings are down 9.7% this year. Assets reached a record 2,632.5 tons in December. The value fell on April 15 to $103.24 billion, the lowest since May 2011.

Gold’s slump has eroded the value of reserves held by the world’s central banks and the International Monetary Fund to about $1.4 trillion from the record $1.96 trillion, based on World Gold Council data. Policy banks added 534.6 tons last year, the most since 1964, according to the group.

The U.S. and Germany are the biggest holders, with the metal accounting for more than 70% of their total reserves. Russia, the seventh-biggest holder with 976.9 tons, boosted buying in the past seven years.

The selloff was sparked by mounting concern that Cyprus would be forced to sell gold from its reserves and “potentially reflecting a larger monetization of gold reserves across other European central banks,” Goldman Sachs analysts said in a report yesterday. The island nation owns 13.9 tons, according to the council.

‘Extremely Concerning’

The gold price decline is “extremely concerning,” South Africa Reserve Bank Governor Gill Marcus told reporters in Cape Town yesterday. The bank, which holds 125.1 tons, won’t adjust its reserve policy following the slump, Marcus said.

Sri Lanka’s central bank governor said falling prices are an opportunity for nations to raise gold reserves and that the island will “favorably” examine buying more. The Bank of Korea said the plunge isn’t a “big concern” because holding the metal is part of a long-term strategy for diversifying currency reserves.

About $773 billion was wiped from the value of all gold holdings globally on April 15, to about $7.5 trillion from $8.3 trillion last week, based on futures and a 2011 estimate by the World Gold Council that 171,300 tons of the metal have been mined. The amount erased is greater than the market capitalization of all the stocks trading in Singapore, according to data compiled by Bloomberg.

Investors Selling

“People are moving to equities as it is the most remunerative asset,” Jeffrey Sica, who helps oversee more than $1 billion as the president of SICA Wealth Management in Morristown, New Jersey, said in an interview yesterday. Sica said he cut his gold holdings to about 7% from 20% of assets on concern that the plunge may continue.

Billionaire investor George Soros, who called bullion the “ultimate asset bubble” in 2010, reduced his stake in the SPDR gold fund by 55% in the fourth quarter.

“Gold has somehow lost the safe-haven status,” said Robert Keck, the president of Princeton-based 6800 Capital LLC, which manages about $630 million. “A lot of money has definitely flown into equities this year. While the economic data may have some hits and misses, equities are being clearly preferred over gold.”

Bloomberg News

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